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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Schlumberger Ltd (NYSE: SLB)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 06/11/2001


End date: 06/08/2021
Start price/share: $29.90
End price/share: $35.90
Starting shares: 334.45
Ending shares: 493.60
Dividends reinvested/share: $21.53
Total return: 77.20%
Average annual return: 2.90%
Starting investment: $10,000.00
Ending investment: $17,716.40

As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 2.90%. This would have turned a $10K investment made 20 years ago into $17,716.40 today (as of 06/08/2021). On a total return basis, that’s a result of 77.20% (something to think about: how might SLB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Schlumberger Ltd paid investors a total of $21.53/share in dividends over the 20 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).

Based upon the most recent annualized dividend rate of .5/share, we calculate that SLB has a current yield of approximately 1.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $29.90/share purchase price. This works out to a yield on cost of 4.65%.

Here’s one more great investment quote before you go:
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman